Peter Thiel on Bitcoin

[Piper67]

I still believe there is little use in trying to convince people up high to buy into Bitcoins and just let them be with their ignorance and/or FUD and instead just come to an understanding that it's us who are in charge.

+1
Sometimes it feels like trying to convince the CEO of Kodak that digital cameras are the future, and should be adopted as a replacement of their film industry, 10 years ago.

Heh... maybe 15 years ago, more than 10, but the analogy is a good one!

[Phinnaeus Gage]

I was the one who asked him questions at the IHS social.

Basically I said that in every objective measure of a currency's usefulness, bitcoin is superior to gold.  Then he informed me that currencies didn't have objective value, which was sort of funny standing next to to the head of YAL who was an avowed objectivist.

Anyway, I asked why gold was any better than eggs, or shells, or beads, or anything else with the classical notions of concrete tangible value that predated gold and he explained that gold was concentrated and easy to transport.  So I then asked him if being able to load the 1.5 billion value he sold paypal for onto one usb drive rather than the 400 tons of gold he would need to lug around otherwise had objective value.  He kinda dismissed the point and tried to explain how no one used bitcoin and that was its downfall.  I pushed back again pointing out the million or so dollars traded for bitcoins in the last day, the 60,000 GPU's mining bitcoin right now, and the 40,000 or so Silk Road users as all providing fairly stable bootstrapping mechanisms along with the interest in adoption by those in destabilized economies such as Africa.

I then tried to point out other advantages such as being impossible to counterfeit, far more divisible than gold/paper/etc., and soon to be added 2-party escrow/multisig transactions.  I don't think he really grasped the usefulness of each of those factors and I decided to stop pressing the issue so some other kid could ask about what school they should go to or something equally inane.

The whole conference was so encouraging because of raw numbers (over 1000 libertarians) but it was rather sad that it was more about shiny suits than debating ideas.  I would have loved to give a presentation on bitcoins, spectrum property rights, and inevitable deflation of the federal reserve system to spark at least something.  The Stossel taping that will be showing on Thursday was also rather sad, John Bolton was a complete tool and the crowd rightfully booed him, but I'm sure it won't play well on television.

There's something a lot about you, CoinSpeculator, I like. I envision you debating Bitcoin with some naysayer, and not even skipping a beat. I also like your writing style, but don't tell evoorhees I said such.

~Bruno~

[cbeast]

I then tried to point out other advantages such as being impossible to counterfeit, far more divisible than gold/paper/etc., and soon to be added 2-party escrow/multisig transactions.  I don't think he really grasped the usefulness of each of those factors and I decided to stop pressing the issue so some other kid could ask about what school they should go to or something equally inane.

Well done. It is also important to not sound like a raving lunatic. Bitcoin doesn't need wide acceptance to muddy the waters until it is more useful. Each new innovation will enlighten more people.

[kurtosis]

I still believe there is little use in trying to convince people up high to buy into Bitcoins and just let them be with their ignorance and/or FUD and instead just come to an understanding that it's us who are in charge.

The less you debate about Bitcoin the more gets done > more applications > more users > more profit.

+1. 

"Don't worry about what anybody else is going to do… The best way to predict the future is to invent it. Really smart people with reasonable funding can do just about anything that doesn't violate too many of Newton's Laws!"  - Alan Kay

[sunnankar]

The less you debate about Bitcoin the more gets done > more applications > more users > more profit.

That is great advice. It would really be nice if Bitcoin were a 'silent giant'. The best businesses are those no one even knows exist.

One thing to keep in mind with Bitcoin is that it is a sterile asset, even more so than gold in my opinion, and as such and any increase in the value of bitcoins is a result of wealth that was already produced and stored in some other form being transferred to the holder of the bitcoins. Why even let people know their wealth is being siphoned away as Bitcoin grows?

[fellowtraveler]

This weekend I was at the International Students for Liberty conference where Peter Thiel gave the opening keynote. I asked him about PayPal's crypto-anarchist roots and the future of Bitcoin and currencies that might follow (in retrospect, I should have specified Bitcoin, because he was a bit vague with his response), and he seemed somewhat fond of the idea, hinted that some sort of cyber-currency future is inevitable, but said that Bitcoin isn't likely to have the network effects necessary to take off, and said that gold-backed currencies already have a great deal of support, and would serve as a better fit for a competing currency. He said that he would have more to say on the topic. Someone I talked to who attended a private social with Thiel mentioned there was an impression that Thiel hadn't done his homework when further questioned on the topic.

I don't have his exact response, but I know the event was taped, and suspect that videos will be uploaded by Students for Liberty after editing.

Edit1: CoinSpeculator shares details of a more in-depth discussion with Thiel
https://bitcointalk.org/index.php?topic=64610.msg760848#msg760848

I have started to hear of this Peter Thiel character over the past year or so, and I have been impressed with his intellect and his focus on issues that our dear to our hearts, here on this forum.

Clearly he has not yet grasped the full impact, if he is still thinking of Bitcoin and Gold as competing things, instead of thinking of Bitcoin as a new technology that will someday be used for transferring gold. The Bitcoin community and the digital gold community are going to merge. The whole will be greater than the sum of its parts. Both commodities have important roles to play in a larger picture of things. Those who still think that it will be "one community or the other" have not yet grasped the full implications of what is happening.

However that is no matter, because soon everyone will come around, and probably Mr. Thiel sooner than most.

As for Bitcoins and gold, it's important to keep in mind that neither has "intrinsic" value.
Rather, both are valued by men for their unique properties.

Gold is:
-- Divisible.
-- Fungible.
-- Value dense.
-- Recognizable.
-- Durable.
-- Zero counter-party risk.
-- Stable in supply, yet minable.
-- Liquid.
-- International.
-- Non-manipulatable. (Non-centralized.)


By comparison:
-- Diamonds, while valuable, are NOT divisible, nor are they fungible.
-- Water, while valuable and divisible, is not value-dense enough to compete with gold as a form of money, on the free market.
-- Food, while valuable, is not durable.
-- Dollars, while liquid, do not represent zero-counter-party-risk (rather, they are debt-based.)
-- Dollars, while recognizable, are not stable in supply (inflation is a worry).
-- Dollars are also not minable. (Production is available only to a monopoly cartel, versus gold, which anyone can produce.)
-- Food, which anyone can produce, is not liquid, especially in comparison to dollars or gold.
-- Dollars, while you can hold them in your pocket, a board of bankers still has the power to reach into your pocket and manipulate its value. (This is not the case with gold.)


Soon it becomes very clear that gold was never "declared" to be a form of money by any "authorities" but rather, became money due to natural market forces.
If gold became money strictly due to natural market forces (as a result of its unique properties) then clearly the only reason it has been supplanted by dollars is due to artificial restraints imposed on the market by government force. (Such as legal tender "laws", tax "laws", money laundering "laws", etc.)
Such forces must be constantly active, otherwise, natural market forces would immediately resolve back to gold again as they have for thousands of years.


Now let's consider Bitcoin's unique properties:
-- Divisible.
-- Fungible.
-- Value dense.
-- Recognizable.
-- Durable.
-- Zero counter-party risk.
-- Stable in supply, yet minable.
-- Liquid.
-- International.
-- Non-manipulatable. (Non-centralized.)
AS WELL AS:
-- Non-confiscatable.
-- Accounts cannot be frozen.
-- Anonymity is possible.
-- Electronically transferrable.


As you can see, Bitcoin's unique properties are similar to those of gold, although it adds new properties due to its ethereal nature.

Those new properties (non-confiscatable, non-freezable, pseudonymous, transferrable electronically) all serve to route-around the artificial forces that are currently being used to supplant gold with the dollar. After all, the various immoral, legal-tender legislation in place today uses the force of a gun to impose fiat money onto an economy that would otherwise resolve to gold by natural forces. That artificial force depends on the government's collusion with banks and their collective monopoly on the ability to issue, store, freeze, confiscate, track, and transfer dollars.

What happens once Bitcoin destroys their ability to do so?

===> What will happen is that Bitcoin will take a pre-eminent role for all digital currency transfers (for ALL currency types including gold.)
===> It will also serve as the censorship-proof "universal medium" for all other online settlements.
===> Gold will eventually revert to its status as money, due to natural market forces that will be unleashed by the technology of Bitcoin, etc. (Just as Bitcoin has enabled people to buy drugs online, meaning Bitcoin has brought natural law to the drug market, so in the same way, Bitcoin will enable people to use gold as money, meaning Bitcoin will also bring natural law to the monetary system.)
===> Of course, gold has already reverted to its status as money at the elite, national, and central-banking levels. But Bitcoin has the potential to enable this for the livestock/slaves at the plebe level as well. (The proletariat.)
===> Ripple will fill the need for credit lines and expansion, in an F2F manner. It will also enable all participants to exchange in-and-out of all other currencies, including fiat currencies, while entirely routing around all existing government-imposed bottlenecks and "money-transmitting authorities". People will easily be able to exchange in-and-out of the system by way of their own trusted friends and attorneys.
===> I believe also that small vault operators, as envisioned by Andrew McMeikan of PKTP, will have an important role to play.
===> As will various transaction servers along the lines of Ricardo, PKTP, Loom, Truledger, and Open-Transactions.
===> As well as various DGC issuers and Bitcoin voting pools.


The next time one of you gets an opportunity to explain Bitcoin to Peter Thiel, please give him more of a "big picture" view of things, and don't let him go astray down the primrose path where people still think of Bitcoin and Gold as "either-or" sort-of-things, when in fact each has unique properties, and its own part to play in a larger, overall vision.

[Rassah]

Would it be fair to say that, in light of Bitcoin, gold is no longer "value dense?"

[NOTtheMessiah]

The video is now up: http://www.youtube.com/watch?v=5fsUMoHZ1cY#t=857s

The forms can stay very much the same, the substance can shift quite a bit, and I think something like that has happened with money. The challenge with creating alternate currencies is that it's very hard to get the network effect going. My own theory would be the only kind place to create an alternate network effect, if you really want to create an alternate currency, would be for it to gold-based. There are enough people believe in gold that you could probably get it to the tipping point. Starting something completely different from scratch I think is very hard to do. I'd have a lot more thoughts on it, but I would say you want to go with gold

[herzmeister]

he means, like, e-gold?

[kurtosis]

The video is now up: http://www.youtube.com/watch?v=5fsUMoHZ1cY#t=857s

Been waiting for that, muchos gracias.

[cbeast]

Gold is so 17th Century. Gold coins have been counterfeited since they've been invented and are still today. Much of it can be found at the bottom of the ocean where it was unsuccessfully protected by the ships that carried it. You may assay gold to a point, but you are not assured 100% results. Gold is just not a convenient form of exchange. Every time it changes hands there is risk of it being stolen. Holding gold is nothing more than enabling the irrational behavior it elicits. I just don't see any reason to treasure gold any more than the artwork much of it was melted from. Who knows, maybe guys like Thiel will bring back pirates and highwaymen armed with metal detectors and weapons? Lock your doors and hide your gold well. Or you can always trust the banks to keep it safe, look how well they treated your paper money, after all.

[Vitalik Buterin]

Soon it becomes very clear that gold was never "declared" to be a form of money by any "authorities" but rather, became money due to natural market forces.

Interestingly enough, this is actually false - gold coins were originally used by kings as a way of forcing their citizens to support local armies by making it the only legal tender for taxation. Genuine decentralized societies tended to use proto-Ripple-style credit systems. Read David Grabeber's Debt: The First 5000 Years.

[defenestra]

Gold is so 17th Century. Gold coins have been counterfeited since they've been invented and are still today.

Counterfeited gold coins HAVE to be made of gold to a (not small) degree. If not then alloy density will simply mismatch too much. USG scanners show structure of insides; even wolfram based fakes will not pass such a test.

For a comparison, paper currencies are counterfeit to a much higher degree already. And found fake banknotes lose all their value immediately. So gold coin (even when faked) is much safer.

Much of it can be found at the bottom of the ocean where it was unsuccessfully protected by the ships that carried it.

Even today we have catastrophes of many kinds; people die and/or lose all their wealth. Do you mean that because there is always some kind of risk we should dismiss ways of wealth preservation?

You may assay gold to a point, but you are not assured 100% results.

No - gold as physical element has enough unique properties to be 100% sure it's gold. Unless an assayer is completely incompetent.

Gold is just not a convenient form of exchange. Every time it changes hands there is risk of it being stolen.

Every time you are going to use cash there is chance it may be stolen. Every time you are making credit card transfer there is a chance it may be stolen. Basically every time you are getting out a house you may get robbed, too. So what you really says is that bad accidents do happen? Yes they do - it's just life like it is...

Holding gold is nothing more than enabling the irrational behavior it elicits. I just don't see any reason to treasure gold any more than the artwork much of it was melted from. Who knows, maybe guys like Thiel will bring back pirates and highwaymen armed with metal detectors and weapons? Lock your doors and hide your gold well. Or you can always trust the banks to keep it safe, look how well they treated your paper money, after all.

?

Then I don't understand your previous statements... As anything else BTC has it share of associated risks too.

[cbeast]

Really? You think everyone should carry gold coins in their pockets again?

Gold is so 17th Century. Gold coins have been counterfeited since they've been invented and are still today.

Counterfeited gold coins HAVE to be made of gold to a (not small) degree. If not then alloy density will simply mismatch too much. USG scanners show structure of insides; even wolfram based fakes will not pass such a test.

For a comparison, paper currencies are counterfeit to a much higher degree already. And found fake banknotes lose all their value immediately. So gold coin (even when faked) is much safer.

Yet they are often counterfeited even today. Do you expect everyone to own USG scanners?

For a comparison, Bitcoin cannot be faked, even a little. It is much safer.

Much of it can be found at the bottom of the ocean where it was unsuccessfully protected by the ships that carried it.

Even today we have catastrophes of many kinds; people die and/or lose all their wealth. Do you mean that because there is always some kind of risk we should dismiss ways of wealth preservation?

Bitcoin is 100% secure for anyone bothering to encrypt and duplicate their secure wallets. No natural disaster can make you lose them. Only carelessness can destroy bitcoins.

You may assay gold to a point, but you are not assured 100% results.

No - gold as physical element has enough unique properties to be 100% sure it's gold. Unless an assayer is completely incompetent.

What do you call an assayer that graduates at the bottom of his class? An assayer.

Gold is just not a convenient form of exchange. Every time it changes hands there is risk of it being stolen.

Every time you are going to use cash there is chance it may be stolen. Every time you are making credit card transfer there is a chance it may be stolen. Basically every time you are getting out a house you may get robbed, too. So what you really says is that bad accidents do happen? Yes they do - it's just life like it is...

This forum is about Bitcoin. I never said anything about cash or credit cards. Soon we will have Bitcoin based checks and cards. A Bitcoin based instrument not only cannot be used if stolen, but your identity will never be required to be shown for anyone to steal. They will even be safe for children to carry, because m-of-n signature capabilities can keep their parents/guardians in the loop.

Holding gold is nothing more than enabling the irrational behavior it elicits. I just don't see any reason to treasure gold any more than the artwork much of it was melted from. Who knows, maybe guys like Thiel will bring back pirates and highwaymen armed with metal detectors and weapons? Lock your doors and hide your gold well. Or you can always trust the banks to keep it safe, look how well they treated your paper money, after all.

?

Then I don't understand your previous statements... As anything else BTC has it share of associated risks too.

Only carelessness can put Bitcoin at risk. Well, that and the destruction of the internet.

[molecular]

The challenge with creating alternate currencies is that it's very hard to get the network effect going. My own theory would be: the only kind of place you could create alternate network effect, if you really want to create alternate currency, would be for it to be gold-based. That's something where I think there are enough people that already believe in gold, so you could probably get it to a tipping point. Creating something completely different from scratch is something very hard to do.
I have a lot more thoughts on it, but I think you wanna go with gold. [cheers from the crowd and applause]

Uhuh, ok, some remarks of mine:

• lots of gold-owners in the crowd
• "Creating something completely different from scratch is something very hard to do" <- let me quote JFK: "we choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard". and also: dude, we kinda did it already, didn't we?
• how would this gold-based currency "idea" of yours work online and why are pecunix and e-gold (started early last decade) not reaching the tipping point yet, then?
• I agree that Thiel did not do his homework on bitcoin.

[kiba]

• lots of gold-owners in the crowd
• "Creating something completely different from scratch is something very hard to do" <- let me quote JFK: "we choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard". and also: dude, we kinda did it already, didn't we?
• how would this gold-based currency "idea" of yours work online and why are pecunix and e-gold (started early last decade) not reaching the tipping point yet, then?
• I agree that Thiel did not do his homework on bitcoin.

Yeah, nobody use gold for anything BUT storing it as wealth protection.

[evoorhees]

The next time one of you gets an opportunity to explain Bitcoin to Peter Thiel, please give him more of a "big picture" view of things, and don't let him go astray down the primrose path where people still think of Bitcoin and Gold as "one or the other" sort-of-things, when in fact each has unique properties, and its own part to play in a larger, overall vision.

Fellowtraveler - your post regarding gold and bitcoin was one of the best I've seen. Really well stated, and absolutely correct.

Gold and Bitcoin are both valuable due to their specific attributes, some of which are in common and some of which are unique between themselves. Far from being mutually exclusive, they are beautifully complimentary, and anyone who understands the reasons gold is "real" money ought to understand (with a bit of explanation) why Bitcoin is also real money, and vice versa.

[FreeMoney]

The less you debate about Bitcoin the more gets done > more applications > more users > more profit.

That is great advice. It would really be nice if Bitcoin were a 'silent giant'. The best businesses are those no one even knows exist.

One thing to keep in mind with Bitcoin is that it is a sterile asset, even more so than gold in my opinion, and as such and any increase in the value of bitcoins is a result of wealth that was already produced and stored in some other form being transferred to the holder of the bitcoins. Why even let people know their wealth is being siphoned away as Bitcoin grows?

That's not true. For example we need tons of staff and huge secure buildings and trucks to secure dollar transactions. When we switch to Bitcoin we save are wealthier and more value is stored in Bitcoin than previously was stored in dollars. From a more individual perspective we are wealthier when we move our commerce into the Bitcoin realm because we save tx fees.

[evoorhees]

The less you debate about Bitcoin the more gets done > more applications > more users > more profit.

That is great advice. It would really be nice if Bitcoin were a 'silent giant'. The best businesses are those no one even knows exist.

One thing to keep in mind with Bitcoin is that it is a sterile asset, even more so than gold in my opinion, and as such and any increase in the value of bitcoins is a result of wealth that was already produced and stored in some other form being transferred to the holder of the bitcoins. Why even let people know their wealth is being siphoned away as Bitcoin grows?

That's not true. For example we need tons of staff and huge secure buildings and trucks to secure dollar transactions. When we switch to Bitcoin we save are wealthier and more value is stored in Bitcoin than previously was stored in dollars. From a more individual perspective we are wealthier when we move our commerce into the Bitcoin realm because we save tx fees.

Bingo. A bitcoin-based economy moves resources more efficiently, meaning less is lost and more is produced. Thus, humanity itself is wealthier, and if one could do a proper accounting of this phenomenon I'd imagine that wealth gain would be quite extensive.  Compare it to letters and email... society gained massive wealth by utilizing email instead of paper letters.

[cypherdoc]

The next time one of you gets an opportunity to explain Bitcoin to Peter Thiel, please give him more of a "big picture" view of things, and don't let him go astray down the primrose path where people still think of Bitcoin and Gold as "one or the other" sort-of-things, when in fact each has unique properties, and its own part to play in a larger, overall vision.

Fellowtraveler - your post regarding gold and bitcoin was one of the best I've seen. Really well stated, and absolutely correct.

Gold and Bitcoin are both valuable due to their specific attributes, some of which are in common and some of which are unique between themselves. Far from being mutually exclusive, they are beautifully complimentary, and anyone who understands the reasons gold is "real" money ought to understand (with a bit of explanation) why Bitcoin is also real money, and vice versa.

yeah, i remember Fellowtraveler making a key argument last Spring on a podcast about the "liquidity" of Bitcoin.  he actually uses the term in an incorrect manner if you're thinking in financial terms but i understood him quite well in meaning that Bitcoin can move around the globe seamlessly and instantaneously without friction.  i like his way of thinking and totally agree.